PEKING (Reuters) – China's factory activity contracted for the fourth month in a row in August as US trade pressure rose and domestic demand remained weak, indicating a further slowdown in the world's second-largest economy.

The continuing weakness in China's vast manufacturing sector could spur expectations that Beijing will have to roll faster and more aggressively to weather the biggest downturn in decades. [PMI] The PMI fell to 49.5 on Saturday, down from 49.7 in July, below the 50-point mark separating monthly growth from contraction.

A Reuters survey found that analysts expected a month-over-month PMI to remain unchanged in August.

The official factory display showed that trade breaks with the United States increased and the slowdown in global demand continued to affect China's exporters.

Export orders declined for the 15th month in a row in August, albeit more slowly. The sub-index rose from 46.9 in July to 47.2.

Manufacturers in consumer-related sectors such as the automotive sector were particularly vulnerable. Automakers such as Geely ( 0175.HK ) and Great Wall ( 601633.SS ) have lowered expectations in terms of sales and profits.

The data showed that activity among small and medium-sized enterprises was declining, although large manufacturers, many of whom were supported by the government, expanded in August.

The factories continued to cut jobs in August amid uncertain business prospects. The employment sub-index fell to 46.9 after 47.1 in July.

ESCALATIONS

In August there were dramatic escalations in the bitter Sino-US trade dispute. President Donald Trump announced earlier this month that he would impose new tariffs on Chinese goods and allow China's tariffs from 1 September. Yuan currency weakened sharply days later.

After Beijing retaliated with retaliatory tariffs, Trump said the existing charges would be raised in the coming months as well. The combined measures now effectively cover all Chinese exports to the United States.

Both sides reported this week that they are discussing another round of personal negotiations next month, hoping there will be room for de-escalation.

Trump said on Monday that China wanted to "very badly" reach a deal, citing what he called increasing economic pressure on Beijing and job losses.

However, most analysts doubt that the dispute will soon end, and some have recently cut Chinese growth forecasts in the coming quarters.

China's service sector grew again in August for the first time in five months. The official figures of a separate company survey rose from 53.7 in August to 53.8.

Beijing has relied on a strong service sector to cushion some of the economic impact of trade uncertainty and sluggish manufacturing activity.

Despite the higher total number of activities in the real estate industry declined, the statistics office said in a statement.

The service sector has been supported in recent years by rising wages and robust purchasing power of Chinese consumers. Towards the end of last year, however, the sector eased following a more general slowdown.